Saturday, May 02, 2015

The best part of this year’s
Berkshire meeting—except seeing Charlie Munger in good form, which we’ll get to
in a bit—was the movie.

Not the movie itself, but the end of the movie, when the sing-along tribute to Berkshire’s managers, which always used to be set to the tune of “My
Favorite Things,” turned out to use “Sgt. Pepper” instead.

That’s some good taste there.

But, actually, the best part of the
Beatles-themed piece of the movie came as it died out and, miraculously, the “Sgt. Pepper Reprise”—the best two minutes of The
Beatles ever recorded, in your editor’s opinion—began to play during the credits.

(Yes, we know—Dear Prudence…Across the
Universe…Revolution…Oh! Darling…Something…Everybody’s Got Something To Hide…The
End—are up there, but it all depends on what mood you’re in,
right?And the mood we were in was,
“Hey, this is seriously good taste.”)

But that was before the absolute
best part of the entire meeting actually occurred, which was when the Sgt.
Pepper Reprise died out and the house lights stayed dim and suddenly that
willowy organ introduction—Can they
really be playingthis?—to
Joe Cocker’s full-throated ¾-time version of“With a Little Help From My Friends” began to coil above the sound of
20,000 or so Berkshire shareholders shifting in their seats waiting for Warren
and Charlie to hit the stage, which they did as The Grease Band came in over the organ with a bang, young Jimmy Page leading the charge on electric guitar…

It doesn’t get any better than that.

And it didn’t.

Not that it wasn’t a good
meeting.It was a very good
meeting.It just was kind of all
downhill from there—at least when it comes to the energy of the thing.

Substance-wise, Warren and Charlie sat for the usual five-plus hours of thoughtful questions (for the most part)
and thoughtful answers (with a bit of deft tap-dancing on Warren’s part,
particularly when the enormously touchy subject of 3G—the Brazilian takeover
artists whose Berkshire-financed slashing-and-burning at Heinz has turned a
sleepy-but-modestly-profitable ketchup company with declining sales into a
hugely profitable ketchup-and-potentially-mustard company with declining sales—came
up).

Naturally, Carol Loomis did the
bringing up, because a) Carol is a terrific journalist, and b) Carol has no
fear, while she also knows that Buffett can rationalize anything.

And rationalize 3G he did, saying “I
don’t think you can ever find a statement that Charlie and I have made…where
we’ve said more people than are needed should be working at our companies.”

That’s not the point, of course: the
point is that if 3G ran Berkshire it would very likely have substantially fewer
than 300,000+ employees in short order, no matter how often Buffett points to
the 25 FTEs at corporate headquarters as proof that Berkshire doesn’t have any
fat.

(Buffett later, and ludicrously,
claimed that if Berkshire operated as a normal bloated American company it
would have a huge corporate headquarters staff which 3G would be entitled to
slash if it ran Berkshire—thus ignoring the corporate headquarters functions
scattered throughout all the various Berkshire companies, which naturally have
their own CFOs and Treasurers and controllers and legal et al.)

But we came to praise Buffett and
Munger, not to criticize them, particularly Charlie, who got in his usual
wonderfully concise, pointed observations after Buffett had frequently wandered around the
metaphorical map on various topics ( and Charlie participated in literally every question asked during the
first half of the session).

For example:

On why Clayton Homes (criticized in
a recent Seattle Times “expose”) has some customers who default: “If we made
the default rate zero we wouldn’t be lending to people who need it.”

On what investment formula Buffett and Munger could provide to evaluate companies: “We don’t have a one-size-fits-all
system.”

On his and Buffett’s
less-than-healthy diets: “The way I look at it, if I die earlier I’ll just
avoid a few months of drooling in the nursing home.”

On why Van Tuyl has been wildly
successful in the notoriously nepotistic car business: “Van Tuyl has a system
of meritocracy where the right people get the power and the ownership.”

On why Berkshire changed over time
as it did: “We were always dissatisfied with what we knew…we wanted to learn
more.”

On how to succeed without a business
degree: “Play the hand you’ve got.”

And on what he and Buffett look for in
business partners: “The trustworthiness is more important than the brains.”

And that’s just the first half of
the meeting, because we left at the lunch
break, never to go back.Readers who
wish can call up Charlie’s bon mots on Twitter and on the “live-blogs” of any
of half a dozen financial news outlets that covered the event, but we’re not
going to pretend to have been when and where we weren’t.

Why now?

Maybe it was seeing the NetJets
pilots and attendants, dressed to the nines in their uniforms and walking quietly
and respectfully in a very long oval outside the CenturyLink Center the entire
meeting, so different in seriousness and demeanor from past “Hey look at
us!”-type protests at the Berkshire meeting; maybe it was Buffett’s inability to
admit publicly, “Well, yes, it’s true, the 3G guys are more Mr. Potter than my
George Bailey, but so what?”; maybe it’s the fact that Business Insider—Henry
Blodgett’s quite wonderful online vision of what would happen if People
Magazine covered the business world (with occasional great scoops thrown in the mix)—published a
reporter’s visit to Warren Buffett’s Favorite Steakhouse (here), complete with photos
of the actual type of steak Warren likes to order…

We don’t know, but after hearing Joe
Cocker (1944-2014, sadly) singing his guts out on the heels of Ringo and The
Boys slamming it, the whole thing just seemed like enough.

And so, enough.

Jeff Matthews

Author
“Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”

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